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(Washington D.C.)- House Ways and Means Trade Subcommittee Chairman Sander Levin (D-MI) issued the following in response to news reports that China intends to retaliate following the Obama Administration’s decision to provide temporary relief to address a market-disrupting surge in tire imports from China:
“The China PNTR legislation was built on two principles- to support expanded trade as an essential part of increasing economic globalization, and the need for rules of competition governing this expansion. China agreed to this safeguard provision when it joined the WTO and the United States passed legislation granting China permanent normal trade relations status.
“As a result, there is no basis for China’s challenge of the U.S. action here. However, requesting WTO consultations is the only acceptable action – unilateral retaliatory action is not acceptable. Indeed, WTO rules explicitly prohibit such retaliatory actions and I am confident that the President’s action will withstand WTO scrutiny.
“A rules-based trading system is essential in this era of globalization. It is the opposite of protectionism – and indeed is a weapon against it. Abiding by the rules of trade and competition should not spark a “trade war” because the United States would not reciprocate with its own retaliatory action. Instead, the United States will operate within – and defend – the rules-based trading system.
“There are two parts to an effective trade policy: it is necessary to expand trade; it is also necessary to create and implement rules that govern that expansion. Embracing one and rejecting the other would be self-defeating, accentuating the polarization that has handicapped effective discussion and development of effective trade policies.”
Background
WTO-Consistency of U.S. Action on Tires. When China joined the WTO, it agreed that other WTO Members would have the right, for a period of 12 years, to provide temporary relief from any “market disruption” to a domestic industry caused by a surge in imports from China. (Article 16 of the WTO Protocol on the Accession of the People’s Republic of China.)
Under the rules governing China’s WTO membership, “market disruption” exists whenever imports “are increasingly rapidly ... so as to be a significant cause of material injury, or threat of material injury to the domestic industry.” In determining if market disruption exists, the United States is required to consider factors “including the volume of imports, the effect of imports on prices ..., and the effect of such imports on the domestic industry[.]”
In the tires case, the independent, bipartisan International Trade Commission (ITC), after an extensive investigation, concluded that a surge of low-priced Chinese tires had injured the U.S. tire industry. Of particular note, the ITC found that there had been a tremendous, rapid surge in Chinese tire imports (a tripling of imports from 14.6 million in 2004 to 46 million in 2008) and evidence of persistent underselling by the Chinese (Chinese prices were 23-25 percent lower than U.S. prices). Over the same period, the ITC documented that the U.S. tire industry’s sales fell by 30 percent, and more than 5,000 workers lost their jobs.
WTO Rules Prohibit Unilateral Retaliatory Actions. Article 23 of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes provides that Members “shall not make a determination to the effect that a violation [of WTO rules] has occurred ... except through recourse to dispute settlement in accordance with [WTO] rules and procedures[.]” It also provides that a WTO Member must obtain authorization from the WTO before taking retaliatory action.
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